Glossary O

Odd Lot

The purchase or sale of stock in less than the round lot increment of 100 shares.

OEX

OEX is the symbol for the Standard & Poor's 100 cash Index. It is a capitalization-weighted index of 100 stocks from a broad range of industries. OEX is only traded at the CBOE and settles to cash.

Offer

Another name for the ask price. The price of a stock or option at which a seller is offering to sell.

One Cancels Other (OCO)

Two orders submitted simultaneously by one client, where if one order is filled, the other is canceled immediately. A type of order which treats two or more option orders as a package, whereby the execution of any one of the orders causes all the orders to be reduced by the same amount. For example, the investor would enter an OCO order if he/she wished to buy 10 May 60 calls or 10 June 60 calls or any combination of the two which when summed equaled 10 contracts. An OCO order may be either a day order or a GTC order.

Open (O), The

The beginning of the trading session. In reference to the O,H,L,C, "O" represents the opening price of the session.

Open Equity

The value of all open positions in stock and options, less the margin requirements of those positions.

Open Interest

The number of outstanding option contracts in a particular class or series. Each opening transaction (as opposed to a closing transaction) has a buyer and a seller, but for the calculation of open interest, only one side of the transaction is counted.

Open (Price) Order

An order that is active until it is either executed or canceled.

Open Outcry

A public auction, using verbal bids and offers, for stocks or options on the floor of an exchange.

Open Position

A long or short position in stock or options.

Opening Price/Range

The range of the first bid and offer prices made or the prices of the first transactions.

Opening Rotation

Process by which options are systematically priced after the opening of the underlying stock.

Opening Trade/Transaction

An opening purchase transaction adds long stock or options to a position, and an opening sale transaction adds short stock or options to a position.

Option

A call or a put, an option is a contract that entitles the owner to buy (in the case of a call) or sell (in the case of a put) a number of shares of stock at a predetermined price (strike price) on or before a fixed expiration date.

Option Chain

A list of all options on a particular stock.

Option Class

See CLASS OF OPTIONS

Option Pricing Model

Any one of the various models used to value options and calculate the "Greeks". Models typically use six factors in their calculations: the underlying stock price, the strike price, the time until expiration, dividends, interest rates, and the volatility of the stock. TD Ameritrade uses the Black-Scholes model for European-style options, and the Binomial model for American-style options.

Options Clearing Corporation, The (OCC)

The issuer and registered clearing facility of all options contracts traded on any US Exchange. It supervises the listing of options and provides risk management, clearing and settlement services.

Option Disclosure Document

This document is published by The Options Clearing Corporation (OCC) and must be distributed to all clients intending to open an option account with TD Ameritrade. The document itself outlines the characteristics and risks of investing in options. The document is also called the OCC Risk Disclosure Document.

Order

An instruction to purchase or sell stock or options.

Order Book Official (OBO)

Employees of the exchanges, OBOs manage clients' limit orders on the floor of the exchange.

Order Flow

The orders to buy and sell stock or options that brokers send to market makers.

OTC-Option

Options traded in the OTC market. OTC options are not listed on or guaranteed an options exchange and do not have standardized terms, such as standard strike prices or expiration dates. See fungibility.

Out-Of-The-Money Option (OTM)

A call is out-of-the-money when the price of the underlying stock is lower than the call's strike price. A put is out-of-the-money when the price of the underlying stock is higher than the put's strike price. Out-of-the-money options have zero intrinsic value.

Out-Trade(s)

A situation that results when there is some error on a trade. Differences between the buyer and seller regarding option price, option strike price or expiration month, or underlying stock are some of the reasons an out-trade might occur. Other costly errors occur when there was a buy versus a buy or a sell versus a sell.

Over-The-Counter (OTC) Market

A securities market made up of dealers who may or may not be members of a securities exchange. In the OTC market, there is no exchange floor, such as the NYSE or CBOE.

Order Routing System

The system utilized by the Chicago Board Options Exchange (CBOE) to collect, store, route and execute orders for clients of the exchange. The ORS system automatically routes option market and limit orders to the various execution vehicles at the CBOE including the RAES system.